risk

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Risk

Often defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset. In context of asset pricing theory. See: Systematic risk.

Risk

The uncertainty associated with any investment. That is, risk is the possibility that the actual return on an investment will be different from its expected return. A vitally important concept in finance is the idea that an investment that carries a higher risk has the potential of a higher return. For example, a zero-risk investment, such as a U.S. Treasury security, has a low rate of return, while a stock in a start-up has the potential to make an investor very wealthy, but also the potential to lose one's entire investment. Certain types of risk are easier to quantify than others. To the extent that risk is quantifiable, it is generally calculated as the standard deviation on an investment's average return.

risk

The variability of returns from an investment. The greater the variability (in dividend fluctuation or security price, for example), the greater the risk. Because investors are generally averse to risk, investments with greater inherent risk must promise higher expected yields.

Risk.

Risk is the possibility you'll lose money if an investment you make provides a disappointing return. All investments carry a certain level of risk, since investment return is not guaranteed.

According to modern investment theory, the greater the risk you take in making an investment, the greater your return has the potential to be if the investment succeeds.

For example, investing in a startup company carries substantial risk, since there is no guarantee that it will be profitable. But if it is, you're in a position to realize a greater gain than if you had invested a similar amount in an already established company.

As a rule of thumb, if you are unwilling to take at least some investment risk, you are likely to limit your investment return.

risk

see UNCERTAINTY AND RISK.

risk

Uncertainty regarding the possibility of loss.

References in periodicals archive ?
The West Midlands clubs are locked in a final-day struggle with Blackpool, Wigan and Blackburn to remain in the richest league in the world - with the cost of failure estimated at pounds 40m-plus.
IT seemed a simple question: what's the cost of failure in a massive Government contract?
But that is the industry we're in and the cost of failure with the league structures we work under, is difficult.
Yet the tangible and intangible benefits of adopting new forms of collaboration - reducing the cost of failure, leveraging unused IP and external funding mechanisms, increasing access to networks of talent, and establishing greater trust among patients and other stakeholders - could be extensive.
The report makes clear that the cost of failure would be substantial and felt in every state.
The cost of failure, both financial and in sporting terms, would have been immeasurable on the Gunners, who have consistently competed among the elite clubs of European football for more than a decade.
The second in command at the central bank reiterated calls for a pre-funded insurance scheme for savings deposits that is also risk-based to ensure the industry bears the cost of failure.
The cost of failure will not just be measured in lost lives and suffering but also in lost integrity.
No-one ever said being a parent was easy, but now we are learning the true cost of failure.
The reality is too complicated and the cost of failure too devastating to reduce this to a one-source solution.
The government does not assign people to doctors, even though it is possible that people may choose poorly--and health care is an area where the cost of failure can be catastrophic.